Securities Terms and Definitions

Equity As used on a trading account statement, refers to the residual dollar value of a futures or option trading account, assuming it was liquidated at current prices. Amortization Liquidation of a debt through installment payments. Aggregation The principle under which all futures positions owned or controlled by one trader (or group of traders acting in concert) are combined to determine reporting status and compliance with speculative position limits. See CFTC Backgrounder: Speculative Limits, Hedging, and Aggregation. Accrued interest Interest deemed to be earned on a security but not yet paid to the investor. Arbitrage A strategy involving the simultaneous purchase and sale of identical or equivalent commodity futures contracts or other instruments across two or more markets in order to benefit from a discrepancy in their price relationship. In a theoretical efficient market, there is a lack of opportunity for profitable arbitrage. See Spread. Allowances The discounts (premiums) allowed for grades or locations of a commodity lower (higher) than the par (or basis) grade or location specified in the futures contract. See Differentials. Exercise Price (Strike Price) The price, specified in the option contract, at which the underlying futures contract, security, or commodity will move from seller to buyer. Accommodation Trading Non-competitive trading entered into by a trader, usually to assist another with illegal trades. Bear Spread (1) A strategy involving the simultaneous purchase and sale of options of the same class and expiration date, but different strike prices. In a bear spread, the option that is purchased has a lower delta than the option that is bought. For example, in a call bear spread, the purchased option has a higher exercise price than the option that is sold. Also called Bear Vertical Spread. (2) The simultaneous purchase and sale of two futures contracts in the same or related commodities with the intention of profiting from a decline in prices but at the same time limiting the potential loss if this expectation does not materialize. Call An option contract giving the buyer the right but not the obligation to purchase a commodity or other asset or to enter into a long futures position

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	Did You Know?
	Yield to Maturity is defined Yield to Maturity: The rate of return an investor receives if a fixed income security is held to maturity.